Admirers of European semi-socialism — sometimes without the prefix — look upon the high tax rates in the Eurozone as a feature rather than a bug, and they tend to be scornful of those nasty American companies who work so diligently to avoid taxes.
Then there’s the curious case of Volkswagen and Porsche. Former Porsche CEO Wendelin Wiedeking had masterminded an ongoing attempt to buy out the much larger Volkswagen group; it failed, Wiedeking was set free via golden parachute, and after the dust settled, the resulting corporate structure had the Porsche holding company, owned by the Porsche and Piëch families — the government of Qatar has a 10-percent stake — owning 50.7 percent of VW Group, which in turn owned 49.9 percent of Dr. Ing. h.c. F. Porsche AG, the Porsche unit that actually makes and sells cars. (The Porsche holding company owned the other 50.1 percent.)
This has stuck in Volkswagen’s craw for some time now, and earlier this year VW Group decided to buy out the rest of Porsche AG. The trick was finding a way to do so without incurring a ginormous tax bill, and apparently they’ve succeeded:
The way has been found, says Wirtschaftswoche. The out has its price: €118, or $148. That’s the price of one share of Volkswagen stock.
Under the new deal, Porsche SE [the holding company] receives €4.5 billion, and one Volkswagen share. If a share changes hands, then it’s not a sale, but a tax-free restructuring.
Now that’s ingenious. [whistles admiringly] These are apparently the rules in the Eurozone, and Porsche SE is organized under European Community regulations — hence “SE,” short for “Societas Europaea,” the official designation for such an operation. (Before you ask: “Dr. Ing. h.c.” was Ferdinand Porsche’s title, “Doktor Ingenieur [honoris causa],” reflecting the fact that his engineering degree from the Vienna University of Technology was honorary.) Volkswagen will own all of Porsche’s carmaking assets, and will save almost two billion euros in taxes. Warren Buffett, darling of the American left, couldn’t have played it any better.